Beebe: Paid family leave will help the economically disadvantaged the most

It is surprising that as one of the most developed countries in the world, the United States does not have federal laws mandating paid family leave policies for mothers to take care of their newborns or for families to care for sick parents, according to an expert at Rice University’s Baker Institute for Public Policy.

Credit: shutterstock.com/Rice University

Joyce Beebe, fellow in public finance, outlined her insights in a new issue brief, “Paid Family Leave: Balancing Acts.” She describes the benefits of paid family leave for U.S. families and society in general, examines the experiences of three states with paid family leave and presents policy issues that should be taken into consideration to successfully craft a nationwide paid family leave program.

“There are increasing levels of support for a national paid family leave policy,” Beebe wrote. “Such a program would provide the gift of time for working mothers to recover from major health events and to find resources or make care arrangements for their children. This will alleviate the future burden on mothers of the need to leave work on a regular basis to care for children after they have resumed working full time. Paid family leave will help the economically disadvantaged the most and, arguably, provide long-term benefits for families and society overall. However, carefully designed implementation clauses will be important to achieving successful results.”

There is no federal law mandating that either states or private-sector employers provide paid family leave to employees, Beebe said. The 1993 Family and Medical Leave Act (FMLA) provides up to 12 weeks of unpaid leave for eligible employees to take job-protected leave to care for a newborn or adopted child, care for a sick family member or recover from a personal illness. For private sector employers, FMLA is only applicable to companies that have at least 50 employees, and employees must have worked at the company for at least one year to be eligible for the benefit.

“The establishment of the FMLA was an important milestone, but not many workers with newborns or ill family members can afford to lose paychecks for three months and still get by financially,” Beebe wrote. “For example, research that examined the effects of unpaid leave policies on mothers’ leave-taking behaviors has concluded that the positive impacts of unpaid leave policies are greatest for college-educated or married women because they are more likely to be eligible for leave under such policies and also are able to afford unpaid time off work.”

Three states have mandated paid leave programs: California, New Jersey and Rhode Island. State-level benefits are generally funded by employee payroll deductions and administrated through state disability insurance programs, Beebe said. These programs provide approximately four to six weeks of partial wage replacements for qualifying reasons defined by each state. In 2016, the state of New York passed the Paid Family Leave Program, which will pay workers 67 percent of their average weekly wages for up to 12 weeks. This program will start in 2018 and will be fully implemented in 2021; similar to other state programs, it will be funded entirely by employee payroll deductions.

Based on existing research, Beebe said, several characteristics are key to the national program’s design. These include the duration of leave (a reasonable length of time provides the intended benefit, but an overly long period may reduce women’s labor-force participation or increase employers’ cost for additional training and the need to hire temporary workers) and wage replacement rates (a higher replacement rate is associated with longer periods of usage and encourages workers to take the maximum allowable time out of work). Also critical are funding mechanisms (whether to use employee payroll deductions, similar to state programs, or an independent trust fund that both employers and employees would pay into) and potential coordination or substitution with existing private sector benefits.

“Given the status quo, although a nationwide paid family leave program is still the end goal, this appears to be a long-term endeavor,” Beebe wrote. “In the interim, state- and corporate-level programs will continue to fill the gaps, and the United States … (is) still among those countries with no paid parental leave at the national level. The current state programs are still gaining awareness among human resource managers and workers. Over the last few years, paid family leave has received success and support in private sectors that have typically been associated with lower average wages, such as retail and hospitality. Specifically, paid family leave is now offered by companies such as Hilton, Union Square Hospitality Group and IKEA, to both hourly and salaried workers regardless of job function. This is a promising development, and, combined with state-level coverage, more of the U.S. workforce will have access to paid family leave.”

Beebe’s research focuses on tax reforms in the U.S. and computable general equilibrium modeling of the effects of tax reforms. Her other research interests include wealth accumulation over a person’s lifetime and, generally, how public policies influence decision-making.